Labor: Ring in the new year with a proactive compensation practice audit

The beginning of the year brings with it a sense of renewal, a new beginning. As companies kick-start 2012, they should audit at least one human resource practice to make certain they are complying with applicable laws. It involves making sure that there are no gender-based compensation discrepancies in your workforce between women and men doing equal work under similar working conditions.

Earlier this year, Jacqueline A. Berrien, chair of the Equal Employment Opportunity Commission (EEOC), stated: “We have come a long way since the days when gender-based inequities in access to jobs and payment of wages were sanctioned by law, but studies show that a significant portion of the wage disparity cannot be explained by differences in experience, specific work performed, education or other non-discriminatory factors. This persistent disparity is a stark reminder that the EEOC’s work to end every form of sex discrimination in the workplace—including compensation discrimination—is still unfinished business.”

You should heed these types of public comments as a reminder of what you can do to stay ahead. First, don’t wait for a charge of gender-based compensation discrimination to review your compensation practices. Instead, be proactive and audit your compensation practices to identify and address any compensation differences that cannot be explained based upon differences in non-discriminatory factors such as work experience, actual work performed or education.

Next, make sure that senior management has bought into the audit process so that compensation differences that cannot be explained by non-discriminatory factors are addressed. Third, hire outside counsel to provide legal assistance with the audit so that the process and findings can be best positioned to be protected under the attorney-client privilege and the attorney work product privilege.

The following steps should be included in an audit:

Review, by position, the compensation paid to all employees

If you discover compensation differences between men and women holding the same position, conduct a more detailed review to determine the reasons for any differences in compensation including starting salaries, tenure, educational background, performance ratings, geographic pay differences or any other non-discriminatory factor

If you discover compensation differences that cannot be explained based upon any of the above non-discriminatory factors, make the decision to adjust the salary of the lower compensated employee during the next salary review process

Conducting the audit and addressing any compensation differences between men and women alone will not insulate you from EEOC scrutiny, but it will best position you to defend against a charge of gender-based compensation and avoid being a part of the EEOC’s unfinished business agenda.